Shareholder Urges Ashland to Halt Valvoline Spinoff
20 Januar 2016 - 4:29AM
Dow Jones News
By David Benoit
A big shareholder is calling on Ashland Inc. to halt plans to
spin off its Valvoline business and instead seek a buyer for its
specialty-chemicals unit at a time when deal-making in the sector
is robust.
Elmrox Investment Group LLC, one of Ashland's 10 largest
shareholders with a stake worth roughly $100 million, believes the
unit could command a sale price north of $9 billion, pointing to
the planned merger of chemical giants Dow Chemical Co. and DuPont
Co. and other recent deals. Valvoline could be worth more than $7
billion on its own, the investment firm said in a presentation it
plans to release publicly this week.
Ashland currently has a market capitalization of $6.1
billion.
In an emailed statement, Ashland said it welcomes input from
shareholders but stands by its current plan.
"We are confident that our planned separation of Ashland into
two great independent, public companies is our best path forward to
enhance shareholder value," the company said.
Ashland last year said it would separate Valvoline, which makes
motor oil and automotive chemicals and runs retail repair shops,
from Ashland's businesses that make chemicals and compounds that go
into everything from sunscreen and pharmaceuticals to the fluids
used in shale drilling. The company said both units would be better
focused on their distinct strategies once separated.
The Covington, Ky.-based company's shares have fallen nearly 10%
since announcing the split in late September, though shareholders
had long called for a breakup to highlight the Valvoline
business.
In its presentation, which was reviewed by The Wall Street
Journal, Elmrox argued that the company should instead take
advantage of a lively market for chemical deals. There were a
record $176 billion in global chemical deals last year, including
the $60 billion-plus merger of Dow and DuPont, according to
Dealogic.
Elmrox said Ashland's board could benefit from the addition of a
new shareholder voice, given that its current directors
collectively own a relatively small stake in the company. The firm
said the stock has underperformed because the combination of a
consumer-heavy Valvoline business and the specialty-chemicals
division hides its true costs and cash-flow.
Valvoline had about $2 billion in sales and $411 million in
adjusted earnings before interest, taxes, depreciation and
amortization in its 2015 fiscal year, which ended in September.
Ashland's remaining businesses had sales of $3.4 billion and $673
million in adjusted Ebitda.
Ashland's history with Elmrox goes back a few years. The
investment firm's founder, Daniel W. Lawrence, first disclosed a
stake in the company in 2011, and he discussed the company at an
investment conference in July 2013.
In a statement, Mr. Lawrence said the firm thinks highly of
Ashland Chief Executive William Wulfsohn.
"We are confident the Board is fulfilling its obligation to
shareholders and exploring the many ways in which to maximize
shareholder value especially given recent market developments," Mr.
Lawrence said.
Elmrox isn't Ashland's first brush with an outspoken
shareholder. Activist investor Jana Partners LLC built a 7.4% stake
in the company in early 2013 and sought talks about the company's
structure and capital returns. The following year, Ashland sold its
water-treatment business to a private-equity firm for $1.4 billion
and its elastomers business to a rubber producer. Jana sold its
stake in early 2015.
Write to David Benoit at david.benoit@wsj.com
(END) Dow Jones Newswires
January 19, 2016 22:14 ET (03:14 GMT)
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